How much should Massachusetts residents pay in income tax?

Friday

Mar 30, 2012 at 12:01 AMMar 30, 2012 at 6:38 PM

Here’s a question for taxpayers as the deadline to file income taxes approaches quickly: Do you think Uncle Sam and Beacon Hill took too much, too little or just the right-sized bite out of your paychecks this year?

David Riley

(Editor's note: Embargoed until week of April 8, when tax returns are due.)

Here’s a question for taxpayers as the deadline to file income taxes approaches quickly: Do you think Uncle Sam and Beacon Hill took too much, too little or just the right-sized bite out of your paychecks this year?

A coalition of labor unions and advocacy groups believes Massachusetts falls in the “too little” camp, at least for upper-income brackets.

The Campaign for Our Communities calls for raising the state income tax rate from 5.25 percent to 5.95 percent. The proposal also would tax investment income at 8.95 percent, up from 5.3 percent for most investments, but down from 12 percent for short-term capital gains.

Supporters said legislation they back also would hike exemptions to protect low- and middle-income taxpayers, while shielding seniors and the disabled from the higher investment rate.

Cuts to crucial services and annual struggles to balance state and local finances spurred the campaign, predating the recent recession, backers said. They pointed to cuts to mental health and senior programs, the MBTA’s looming budget gap and the proposed closure of Taunton State Hospital, among other things.

“We just do not have a revenue system that is bringing in enough revenue,” said Andi Mullin, director of Campaign for Our Communities. “That is true when the economy is good, and it's particularly true when the economy is bad.”

Supporters said the changes would raise an additional $1.37 billion in tax revenue.

Cuts also have stretched town, city and school budgets thin, supporters said. Government cannot maintain quality public services while addressing budget gaps through cuts alone, they argued.

“It’s all about getting more money into our communities to fund what we view as essential public services,” said Jim Durkin, spokesman for American Federation of State, County and Municipal Employees Council 93, a union that has endorsed the campaign.

Returning to the original question above, count House Minority Leader Bradley Jones, R-North Reading, in the “too much” camp.

Jones sponsored legislation this year to cut the state’s income tax rate to 5 percent by 2013. He said the measure would fulfill a successful 2000 ballot question calling for the state to cut the income tax from 5.95 percent to 5 percent over three years.

The Legislature in 2002 froze the rate at 5.3 percent and set targets for revenue growth under which the rate could drop further. The rate dipped to 5.25 percent this year.

Jones has sponsored similar bills in the past. “I’ve sponsored it simply because I think we have an obligation to fulfill what the voters said they wanted to do,” he said.

Neither effort is likely to advance this year. The Joint Committee on Revenue sent Jones’ bill to study, a move that usually dooms legislation for the rest of the session.

Sen. Sonia Chang-Diaz, D-Boston, is lead sponsor of legislation that would enact the changes supported by the Campaign for Our Communities. Her bill met the same fate.

Campaigners now are trying to drum up grassroots support in hopes of passing the measure in 2013. In eastern Massachusetts, their effort won recent endorsements from city councils in Boston, Cambridge and Fall River, and from the Somerville Board of Aldermen.

Among about 80 groups endorsing the campaign, organized labor is prominent, including the 1199 Service Employees International Union (SEIU), the Massachusetts Teachers Association, the Massachusetts AFL-CIO and the Greater Boston and North Shore labor councils.

The campaign also counts local teachers unions among its supporters, including those in Arlington, Bedford, Boston, Cambridge, Dedham, Fall River and Weymouth.

Paul Toner, president of the Mass. Teachers Association, said budget crunches have led to rising class sizes in some districts and cuts to arts, technology and student support programs. More schools have imposed fees to fund busing and other programs, “increasingly putting the burden on families,” Toner said.

The Massachusetts Senior Action Council, which also backs the campaign, views raising the income tax rates as a way to ensure funding for senior services without competing against other legitimate interests, Executive Director Carolyn Villers said.

“Rather than a bigger piece of the pie,” she said, “we need a bigger pie.”

Jones said he fundamentally disagrees. Hiking the income tax would be a “total, 180-degree about-face” from legislative leaders’ calls to avoid raising taxes, he said.

“It seems to me there comes a point in time that people who are net recipients of money from the government are going to far outweigh net donors,” he said.

If the state had more revenue recently, it might not have enacted important pension and municipal health care reforms, Jones said.

Supporters of the income tax campaign said they agree government can and should be more efficient, but they believe funding needs outweigh savings from further cuts.

Chang-Diaz said added revenue could help the state make investments that would actually save money over time. For example, she cited a bill she has sponsored aimed at reducing the high school dropout rate.

While most arguments against the bill center on cost, Chang-Diaz said, she noted dropouts are more likely to rely on public assistance and make up about 70 percent of jail and prison populations.

“There are so many things we could get right and could get to better efficiency if we can make the upfront investment,” she said.

Barbara Anderson, executive director of Citizens for Limited Taxation, noted House Speaker Robert DeLeo has ruled out tax increases in this legislative session.

“I think there’s no inclination at all to do a tax increase,” said Anderson, whose group led the charge to impose the state’s cap on local property tax growth.

As for the campaign, “we’re just kind of alerting people to say, keep an eye on it,” Anderson said.

Both sides disagree on whether Massachusetts is already taxing its residents at too much. Anderson said the state has a higher per-capita tax burden than most of the U.S.; Chang-Diaz said its income tax burden is below the national average.

“People still unfortunately have this perception that Massachusetts is Taxachusetts,” Toner said. “That’s just not true anymore.”

(David Riley can be reached at 508-626-4424 or driley@wickedlocal.com.)